Food Stamps And The Brezhnev Doctrine

Many readers may not be old enough to personally remember Leonid Brezhnev, the block-headed super-thug who was dictator of the Soviet Union during its long period of stagnation and decline from 1964 to 1982.   Here is a picture:

When Brezhnev is remembered at all, it is for the so-called Brezhnev Doctrine, by which he asserted that any country once turned Communist must never be allowed to go back to capitalism.  He may have been dumb, but he had sufficient instincts to sense that once any part of the empire was lost it could start a cascade and the whole house of cards could collapse very quickly.  In the end, that's exactly what happened.

A very similar but so far nameless doctrine applies to the world of government programs, where the principle is that no program must ever suffer an actual spending cut.  Without doubt the defenders of all government spending are motivated by the same instinct that motivated Brezhnev -- once any cut is made and seems successful, the house of cards is in real trouble.  And thus we see seemingly insignificant and clearly necessary cuts subject to hysterical defense down to the very last dollar. 

This phenomenon is currently playing out in regard to the food stamp program, otherwise known by the official acronym of SNAP.   Prior to the Obama years, food stamp spending tended to go up in recessions and down in recoveries.  But during the five years of the Obama "recovery," food stamp spending has somehow exploded from about $40 billion to about $80 billion per year, with the number of recipients nearly doubling to about 48 million.  Causes of the explosion include the government's aggressive promotion of food stamp dependency, along with lifting of prior restrictions and limits on eligibility.  I have previously covered this issue here.

Now enter the congressional Republicans with a budget proposal to bring about a small reduction in food stamp spending.  As reported at The Hill, the House last week passed a Republican proposal to "cut food stamps by $39 billion."  Of course that's $39 billion over  ten years, less than $4 billion per year.  So we're talking about getting back maybe a tenth of the explosion of the last five years, going from $80 billion per year back to maybe $76 billion.  This is supposedly to be accomplished by re-imposing some of the restrictions previously in place.  For example, the Wall Street Journal reports on September 21 that the 2009 Obama "stimulus" eliminated a 20 hour per week work requirement, and that Obama also eliminated a three month time limit for employable and able-bodied adults, leading the number of employable adults on food stamps to grow by 164% from 2007 to 2011; those restrictions would now be at least partially reinstated.  Nobody is even talking about going after some of the even more outrageous aspects of the program, such as that home equity in unlimited amount and retirement savings accounts in unlimited amount do not count toward food stamp eligibility.  After all, we wouldn't want to restrict our entitlements to just non-millionaires. 

Anyway, cue the hysterical forces seeking to prevent even one dollar of federal spending from ever being cut.  NPR refers to the approximately 5% cut as a "slash"; the Atlantic Wire calls the proposed cuts "massive"; Think Progress says the bill will affect "millions of the most vulnerable people in the country."   From among many crazed reactions, consider this one from one Albor Ruiz in the New York Daily News on September 22:

The bill will leave nearly 4 million Americans hungry, and 210,000 children without school lunches. Apparently, the GOP leaders believe that’s not their problem.  “We’re looking at a hunger crisis unlike any we’ve seen in Food Bank’s 30-year history,” said Margarette Purvis, president and CEO of Food Bank For New York City.  The sheer meanness of the Republicans’ action becomes clear once you know that, nationally, nearly 48 million people — 1.8 million in New York — rely on SNAP. Over 92% of them are children, the elderly, disabled or working families below the poverty line.  Coming at a time when one in five children (16 million) suffer hunger, a record-high, the bill would deprive millions of Americans from a proven lifeline to keeping food on the table.  “I find that idea repugnant and repulsive,” said an irate Rep. José Serrano (D-Bronx), who added that the cuts represented “one of the cruelest visions of government that we have seen in generations.”  Repugnant, repulsive and needlessly cruel, these cuts would be disastrous for New York City.

It's like there's no end to the invective:  "devastating," "sheer meanness," "repugnant," "hunger crisis," "repulsive," "cruel," "disastrous."  All this over a 5% cut, almost all of which is intended to come from able-bodied, employable adults who were not even eligible for the program at all until just a few years ago?  Brezhnev would be proud!

Although not so over-the-top in the rhetoric department, even far more dishonest in my opinion was the lead editorial of Friday September 20 in the New York Times.   Here's what they have to say:

In what can be seen only as an act of supreme indifference, House Republicans passed a bill on Thursday that would drastically cut federal food stamps and throw 3.8 million Americans out of the program in 2014.  The vote came two weeks after the Agriculture Department reported that 17.6 million households did not have enough to eat at some point in 2012 because they lacked the resources to put food on the table. It came two days after the Census Bureau reported that 15 percent of Americans, or 46.5 million people, live in poverty.

The evidence cited by the NYT in favor of its argument is completely fraudulent.  As previously discussed by me here, the DOA did not report "that 17.6 million households did not have enough to eat at some point in 2012" or anything like it.  The report instead found that 17.6 million households, or 49 million individuals, were "food insecure" at some time in 2012, as determined by an affirmative response to the proposition: "We worried whether our food would run out before we got money to buy more."  That question was completely cynically contrived to get a "yes" answer from most or all food stamp recipients, since the program by its design requires recipients to manage a limited budget throughout a month.  If the food stamp program serves 48 million people, and still leaves all or almost all of them  in "food insecurity," (or as the NYT would say, without "enough to eat") shouldn't it be completely scrapped and replaced with something that works, instead of cut a lousy 5%?  Similarly, the Census Bureau "poverty rate" statistic is a total fraud, as previously covered by me many times, including here and here.    To give just one example of the massive dishonesty, included in the government's supposed 46 million in "poverty" are almost 300,000 here in Manhattan, many of whom are observably getting in excess of $100,000 per family per year in in-kind government handouts (housing, Medicaid, food stamps, cell phones, parking spaces), all of which are counted at zero in the poverty statistics.

The question I have about the NYT is, are they intentionally perpetrating the fraud, or have they themselves been taken in by others?  Those are the only two possibilities, and neither is good.  As a partial answer, I would point out that it is not possible to read the DOA's "food insecurity" report and come away thinking that they are saying that the 17.6 million households did not have "enough to eat."

Anyway, from their perspective, the advocates are right to fight for every dollar of government spending, because when the first chips of the edifice start to fall, the whole thing could go quickly like a house of cards, just like the Soviet Union. 

More On The Government's "Sick Game" With J.P. Morgan

I'm getting a little behind on the news here, but I can't let pass the latest government settlement with J.P. Morgan Chase. 

Back on July 1, commenting on a string of huge settlements between large banks and various federal prosecutors and regulators, I said this: 

Basically, any Federal agency that wants its name in the paper can pick one of the big banks and go out and get at least a few hundred million.  Sorry, but this is a very sick game of government aggrandizement with funds provided by the taxpayers through the backdoor.

Well, the settlements keep coming fast and furious, and they get more and more preposterous.   The latest is a settlement of J.P. Morgan with the SEC for $920 million over the so-called "London whale" trading losses.  A September 20 report from Bloomberg on the settlement can be found here.  The underlying event is that a J.P. Morgan trader in London took some huge positions that led to big losses in April and May 2012.  Reports have put the losses in excess of $6 billion.  At the current run rate, that is about equal to one quarter's net income for the bank.

You are probably asking, so what?  J.P. Morgan's trading controls weren't up to snuff and a guy placed some big bets that he shouldn't have and they lost a bunch of their shareholders' money.  Why is that of concern to anyone but their shareholders? 

The answer is that somewhere along the way, the government made everybody's business its business, and most particularly so if you are a big bank.  Do you think there were no consequences to taking those big bailouts? 

Still, now that the government is involved, shouldn't its actions at least make a little sense?  Here's the concept for this one:  J.P. Morgan has been directed by the all-knowing regulators to have trading risk perfectly under control at all times.  Instead they went out and lost $6 billion, causing not only a loss to shareholders, but also putting the government at slightly enhanced risk of future bailouts.  So we're really going to teach them for having lost that much money.  We'll make them lose even more money! We'll add on a $920 million fine!  That'll show 'em! 

The Bloomberg article, quotes Paul Miller of FBR Capital Markets as saying: "The regulators were embarrassed,that's why the fines are so big."  So this has nothing to do with any actual violations of the law, and certainly not with making the bank safer -- it actually makes the bank less safe.  Instead, the criterion is "embarrassment of the regulators."  We ordered you to eliminate all risk from your operations and you dissed us!  Of course, these are the people who missed Madoff.  You'd think they would be beyond embarrassment by this point.

Two New Yorks: Rich And Poor In Chelsea

Our recently anointed Democratic candidate for Mayor, Bill de Blasio, is making the "tale of two cities" and the "crisis of income inequality" the principal themes of his campaign.  Here he is quoted at The Daily Beast a couple of days ago:

The Bloomberg administration managed to ignore the inequality crisis. He claimed he wanted a third term to address the economy, yet very few policies were put in place to address the economic suffering that people are going through. So, yeah, I will be very focused on fighting inequality. That to me is the job of a mayor.

So I want to return to our look at two hypothetical families of four in the Chelsea neighborhood, just a few blocks from where I live.  Both live in comparably sized two bedroom apartments.  One has a cash income from employment of $100,000, which officially puts them at about the top 20% of the income distribution.   This family rents its apartment for $4000 per month, $48,000 per year, which is at the low end of what a two bedroom goes for in this neighborhood.  The other family has little or no cash income and is officially in poverty.  It lives for little or no rent in one of the low income public housing projects in the area, say the Robert Fulton Houses along 9th Avenue between 16th and 19th Streets. 

Now consider this question: If well being is measured by access to physical goods (housing, food, clothing, medical care, etc.) as opposed to the arbitrary government measure of "cash income," which of these two families is better off?  The answer is remarkably close and could go either way.

The "rich" family pays about $25,000 in income taxes and $48,000 in rent, leaving $27,000 for everything else.  The "poor" family gets the $48,000 apartment for free and pays no income taxes.  Its food stamp allowance is about $660 per month (almost $8000 per year) and its cell phones are free.  But they do have a problem of no cash to spend on anything.  Or do they?

Actually, there are many ways to get your hands on some cash if you are poor.  Method number one is welfare, now known as TANF.  That is time limited to 5 years, but it's a start.  Then there is social security disability.  You may qualify for disability, or maybe one of your kids does.  For example, a learning disabled kid is entitled to an SSDI check.  Over 6 million children ages three to 21 received checks for disabilities according to 2010 data here.  (According to NYCHA data here, 41% of NYCHA tenants receive some form of a monthly check for social security, SSI, veteran's benefits, a pension, or other.)  Next comes the Earned Income Tax Credit.  That requires a modest amount of work, such as a part-time job with the City sweeping the parks, or a job at McDonald's.   With a 20 hour a week minimum wage job, you'll earn about $7500 for the year, and then you'll get another about $5000 - 6000 from the EITC.  Then of course there is off the books income of various sorts, and unrecorded cash contributions from the father(s) of the kids.  Obviously not all of the poor people have all of these sources of cash, but the majority clearly have one or more.   

Do we have any way of knowing that all or almost all of the poor have access to substantial amounts of cash?  One way is by observation of the low income housing projects.  Thus I took a walk yesterday over to the Robert Fulton Houses.  Here I have arrived at the main entrance:

View fullsize

I've never been able to find any government in-kind distribution program to provide the poor with air conditioners.  (There is a program to pay the electricity bill for cooling, but that's different.)  So do some or most of the poor people living in RFH have air conditioning?  Here is a picture taken on West 18th Street looking at the northernmost of the three big RFH buildings between 18th and 19th:  

View fullsize

Other than one apartment there on the 11th floor, it looks like every apartment has one or more air conditioners.  But this was a cool very late summer day, so the 11th floor people may have removed the air conditioners from the windows for the season.  Anyway, now looking south at the two big buildings between 16th and 18th Streets, it's the same thing -- hundreds of air conditioners:

View fullsize

Another question:  Do the poor people living in RFH have enough cash to buy cars?  In fact, the buildings are surrounded by parking lots with spaces reserved for tenant parking.  Here is a view of one of the lots:

View fullsize

And here's another lot across the street:

View fullsize

A reserved parking spot in this neighborhood goes for at least $500 per month, $6000 per year, for someone paying cash.  Very few people with cash income of only $100,000 per year can fit that in their budget.

A few other comparisons:

(1) Medical care.  The "rich" family likely gets medical insurance through work, but must make some contribution to the premium, plus there will be some deductible and some co-pays.  That's likely a couple of thousand per year.  The "poor" family gets Medicaid.  New York State pays in excess of $10,000 per beneficiary per year for its Medicaid program, so by the measure of the cost to the taxpayers, the poor family gets medical benefits worth in excess of $40,000. 

(2) Leisure time.  The majority of families earning at the $100,000 level have at least two income earners, and at least one full (or more) time earner.  The poor family has at most one part-time earner.  That's a big difference in leisure time, advantage to the poor family.

(3) Taxes.  The "rich" family pays $25,000 in income taxes, and its landlord pays real estate taxes on the building.  The "poor" family pays no income taxes, instead getting an EITC credit, and RFH pays no property taxes. 

So which family is better off?  By the government's official measure of "cash income," it's $100,000 for the rich family and $7500 for the poor family, a disparity of a factor of over 13 in favor of the rich.   By the measure of access to physical goods and services the poor family very likely comes out ahead.  If you value the Medicaid at what the government pays for it, then the poor family gets at least $48,000 for the apartment, $40,000 for Medicaid, $6000 for the parking space, $8000 for the food stamps, $2000 for the cell phones, $6000 for the EITC, and of course there is the $7500 for the minimum wage job at McDonald's.  That's a total of $117,500 (before getting to any off-the-books cash or SSDI, which would be additional), compared to $75,000 after tax for the "rich" family. 

But the rich family does have one very valuable thing that the poor family does not:  its independence.  And with its independence goes hope for the future.  If they work hard and continue to strive, the $100,000 family could well find itself in five or ten years earning $200,000 and moving up to a much nicer apartment and maybe even getting that parking space, plus saving up a nest egg.  The poor family is trapped in place.   If they make the mistake of earning more observable cash, their rent will be increased by 30% of the increased earnings (that's how it works at NYCHA), and then they start taking away the other benefits as well.  The worst possible thing a single mom of this family could do would be to marry a man with a middle class income, which would disqualify the family for the food stamps and the cell phones and the Medicaid and increase the rent through the roof.  So the poor family is virtually forced to remain in a situation where its measured cash income will keep it well within the poverty level.    

Thus the way actually to allow the poor family to become better off is to decrease the benefits, and/or put time limits and caps on all of them.  Got that, de Blasio? 

Is It Possible To Live In Manhattan And Be In "Poverty"?

Here in famously expensive Manhattan, there is virtually no such thing as an available unsubsidized apartment that does not cost more than the entire Federal Poverty Level income for the smallest family that can fit in that apartment.  So just about everyone in Manhattan lives in a home whose rental value alone exceeds FPL.  The obvious conclusion from that is that there can be no such thing as poverty in Manhattan.  Right?  

Not so fast!   According to the Census Bureau the official poverty rate for New York County (basically the same thing as Manhattan) is 17.6% for the most recent 2007-11 data.  That's actually higher than the 14.5% rate for all of New York State.  With a population exceeding 1.6 million, Manhattan supposedly has about 285,000 people in "poverty."  Yet essentially all of them live in apartments whose annual rental value alone exceeds FPL.  What are we missing?  The answer is highly relevant to understanding the so-called "crisis of income inequality."

The answer is not that there are terrible neighborhoods, slums, where the housing is falling down and poor people are forced to live. We don't have slums in Manhattan any more, at least not slums in the sense of places where the housing is inexpensive.  Harlem and the Lower East Side have both become desirable neighborhoods while nobody was looking.  A search of the very comprehensive Streeteasy data base reveals just one apartment for rent in Manhattan for under $1000 per month.  It's a very small (400 sq. ft.) walk up studio in Harlem only suitable for one person, for $950 per month.  That's $11,400 per year, as against FPL for a single person of $11,490.    Every other Manhattan apartment on Streeteasy has a rent above FPL.  This Manhattan Rental Market Report for August 2013 shows that Harlem is still the least expensive neighborhood to rent an apartment, but the average price for a studio there is now $1481, or $17,772 per year, which is well above FPL for a family of 2.

No, the answer is that the people deemed to be in poverty do not pay full price, or anything close to it, for their Manhattan apartments.   There is a dizzying array of subsidies and handouts available to people to get them into housing in Manhattan if they can define themselves into poverty.  There is low income public housing, Section 8 vouchers, and "affordable housing" and "income restricted" housing of many sorts.  Critical to the entire enterprise is the fundamental proposition that nothing about the apartment you live in counts as income for purposes of determining your income or poverty status.  Obviously, if a the value of a Manhattan apartment, measured by the market rent that everyone else pays for a comparable apartment, counted as part of "income," then it would be impossible for anyone in Manhattan to be counted in poverty.   

Thus, a few blocks from where I live we have the neighborhood of Chelsea, where the cheapest 2 bedroom apartment you can find on the market goes for about $4000 per month.  The neighborhood also has several large public housing projects, where residents are almost all deemed to be in poverty, and pay nothing or next to nothing for their 2 bedroom apartments.  In a very real sense they are receiving income of at least $48,000 per year in the form of the housing -- far above the FPL.  None of it counts in the official measures of income or poverty.

Compare the lives of two families of four living in Chelsea in 2 bedroom apartments.  One earns about $100,000 per year.  It pays about $25,000 off the top in income taxes.  Then $48,000 for the apartment.  Transportation to work is several thousand per year.  Cell phone service is another couple of thousand.  No food stamps or clothing allowances.  This is a very tight budget.  The family across the street in poverty gets the $48,000 apartment for free. Food stamps pay for the food.  The cell phones are free.  Medical care is free.  In measured income statistics, the difference between these two families is $100,000 and zero, enormous income inequality.  In actual consumption, the difference between them is not very large at all.

The so-called "crisis of income inequality" is all over the news right now, from the de Blasio mayoral campaign, to many, many articles from the left-wing punditry.  Try this one today from E.J. Dionne of the Washington Post if you can stand it.  Not one of these people uses remotely honest data to measure poverty or income inequality.

Will Obamacare Destroy The Middle Class American Family?

As readers here know, my main prediction for Obamacare is that it will go quickly into a death spiral as the young and healthy decline to sign up.  But if enough healthy people sign up to enable it to last for several years, there is another major problem that few are mentioning, namely the hugely destructive effect that it is likely to have on the American middle class family. 

The destructive effect arises from the fact that the subsidies under the law are to be allocated based on household income.  Here is a summary of how it works from Kaiser Health News, via PBS, interviewing a partner of Jones Day named Cathy Livingston: 

The law requires consumers to contribute a specific percentage of income to the premium. It's a sliding scale based on the federal poverty level. For example, if your household income is at 150 percent of the FPL, you are required to contribute 4 percent of income toward the premium. If your income is at 300 percent of poverty, then you're required to contribute 9.5 percent. The subsidy then makes up the difference between that amount and the cost of the benchmark plan.

The subsidies continue all the way up to "400% of FPL," which is currently almost $100,000 for a family of four.

I think it has never occurred to these geniuses that people can manipulate their eligibility for subsidies by reconfiguring who is in their household or their family.  Do you think people wouldn't do that?  Well, let's consider the poverty scam once again. 

Have you ever seen the line "the best way out of poverty in America is to get married"? Both liberals and conservatives tout marriage as some kind of cure for poverty.  See, for example, a study from Brookings here, and one from Heritage here.  But they are just engaged in the usual confusion between "poverty" as commonly understood (physical deprivation) and "poverty" as defined in federal statistics (cash income for the arbitrarily-defined "household").  A more honest way to put the same proposition is:  "If you want to have a middle class income while also qualifying for government handouts by reason of being in 'poverty,' then don't get married.  Simply define yourselves as two families instead of one.  The people with the income go in one family and the people without income go in the other."

And thus, with government means-tested anti-poverty handouts now approaching $1 trillion per year, we get a rate of non-marital births for African Americans of 73%, and for whites of 29%.  What this shows is that people are not stupid and know how to organize their lives in order to collect available handouts.  Still, most of the people collecting food stamps and housing vouchers would be at least somewhat toward the lower end of the income distribution even if they combined themselves into traditional families.

But now with Obamacare, we are going to be pushing the incentives to define yourselves as separate families well up into the middle and even upper middle class.   It's not just that every non-working spouse can be re-defined into poverty by failure to marry.  Recognize also that the so-called FPL is more per capita the smaller the family.  According to this HHS table, the 2013 FPL is $11,490 for an individual, $15,510 for a family of two ($7755 per capita), $19,530 for a family of three ($6510 per capita), $23,550 for a family of four ($5888 per capita), $27,570 for a family of five ($5512 per capita), and so forth.   Multiply all those numbers by 4 to get the Obamacare subsidy cutoffs.   At any level of income, groups of single individuals are at a higher "percent of FPL" than multi-person families.  For example, two people each making $23,000 are at about 300% of FPL as a married couple, but only 200% of FPL as individuals. 

Any couple that gets married will immediately greatly decrease its Obamacare premium subsidies.  Kids only make it worse.  The effect is even greater the more the couple's income is skewed to one earner.  

Of course, all this is assuming that this couple is signing up for health insurance at all under Obamacare, which many, many young couples will not do.  

Global Warming Cognitive Dissonance

The global warming thing is rapidly falling apart, but a lot of loud and/or powerful people owe their careers to it.  So with each passing month the contrast grows starker between the evidence of the real world and the program of the zealots.

On the one hand: 

The global temperature as measured by UAH for August came in at +0.16 deg C, remaining well below the peak of +.68 deg C reached way back in 1998, and showing no signs of increasing.

The global temperature as measured by RSS (the other source of satellite-based temperatures) also remains flat and, according to this post at Watts Up With That from Christopher Monckton on September 11, has had a completely flat trend line now for 17 years and 7 months.   Here's the graph:

 

Do you notice that you haven't heard much lately about the crisis of Arctic sea ice?  That's because Arctic sea ice has had a record increase this year.  September is the month of lowest sea ice in the Arctic, so when people raise a scare about an "ice-free" Arctic, they are talking about this time of year.  Last year the September minimum was under 2.5 million sq.km., but this year it's back over 3.5 million sq.km.  Source here.

 

Perhaps it is the Antarctic sea ice that is shrinking?  No, yesterday that actually set a record high for this date, and it has set some 42 daily records this year.

Down in Australia an election has thrown out the Labor party and brought in the Liberals (we would call them conservatives).  The new guys are promising promptly to repeal the carbon tax and disband most or all of the climate bureaucracies:

Tony Abbott’s coalition signalled that it would disband Australia’s Climate Commission – an independent scientific body that provides reliable information on climate change to the public. In response to a report the commission released, warning that extreme weather was made more likely by climate change, Abbott said: “When the carbon tax goes, all of those bureaucracies will go and I suspect we might find that the particular position you refer to goes with them.”

And on the other hand:

The front page of the Wall Street Journal and many other sources today report on new regulations from the EPA that will effectively ban all new construction of coal-fired power plants in the United States.  This report at Town Hall calls the new rules a "De Facto Ban" on coal power plants.  Do they even know that China continues to build new coal power plants at a rate of about one a week?  Let alone that the whole global warming thing isn't happening?

And check out 350.org, energetically organizing a movement at hundreds of college campuses seeking divestment of ownership of companies in the fossil fuel business.  I'll bet your college has a branch!  It's run, of course, by rich kids with nice cars who have never gone a day in their lives without electricity.